Remortgaging early given interest rate prospects. Worth it?

chssvl

I am about to enter the fifth year of my five-year fixed-rate mortgage with Nationwide. When I got the mortgage it was 85% LTV and I was a first-time buyer. Interest rate for the fixed period is 2.19% and, for the last year of the mortgage there is a 1% early repayment charge.

In any case, given the prospects of increases in interest rate, I was wondering if it was worth maybe remortgaging now rather than waiting for the five-year anniversary, even if this means paying the early repayment charge.

We bought from a distressed investor at a good discount and recent transactions in the building indicate an increase in value of at least 15% vs. what we paid. That, plus some extra contributions from our savings (if needed), should mean that we should be able to apply for a 60% LTV mortgage - maybe even 50% LTV. The Nationwide website suggests that another 5-year fixed-rate mortgage with those parameters would have an interest rate of 1.99%, plus the set-up fees of £999.

Is it worth jumping the gun and remortgaging now or am I being too paranoid?

Thanks!

Beetroot_24

You'll need to give more info on the figures (outstanding balance, term) for people to give you an accurate answer.

I product switched early and ditched my fix with Nationwide in December when I got into the final year and ERC halved. My ERC was £500, no product fee and we just about broke even. You have to have an online meeting with one of their advisors because of the ERC, and they do go through the calculations with you. They don't do a 50% LTV mortgage unfortunately. 

chssvl

Thanks. Sorry, should indeed have given a bit more detail.

So, the flat was £500k when we bought it (London prices ). Original mortgage was £425k (plus the £999 set-up fees that were added to the mortgage) for 25 years at 2.19%, which gives a monthly payment of ca. £1,850

There was another flat in the same building sold by the same investor at the same time, but smaller, and sold for £450k at the time, and was recently sold again for £520k. So, I'm conservatively assuming that mine would be valued at least at £550k - wouldn't be surprised if, maybe, it gets close to the £600k mark (we've also made some improvements since we bought it).

Current outstanding balance is just over £350k as we've made some extraordinary payments in previous years within the yearly overpayment allowance (10% of original mortgage amount per year). Given that the ERC for the fifth year of the initial term is 1% of the outstanding balance, minus (I'm guessing) the overpayment allowance for the year, we would have to pay a charge of just over £3k.

So, assuming that we do manage to get the flat valued at around £550k, a 40% LTV mortgage would be for £330k, so we'd need to put up the missing £20k + £3k for ERC + £1k set-up fees, which maybe we can just about manage. We would then go for either a 20-year mortgage for a five-year fixed term at 1.99% or maybe even go for the 10-year fixed, which I think was 2.1%.

Of course, there would be immediate savings as the interest rate would be lower than what we are paying at the moment but, more importantly, would (hopefully) be better off by locking-in the interest rate now before further increases this year by the BoE filter through mortgage rates in a year's time.

Also maybe worth noting that, if I am to pay the ERC in full, could potentially even go with another lender if they have a better deal.

Thanks again